If you owe tax debt and the Canada Revenue Agency (CRA) comes calling, the best step is to pay what you owe in full. The CRA will not forget about you. It may not have contacted you until this point but, now that it has, this is an issue that isn’t going to just go away.

However, if you do not have the money to pay in full, you might be tempted to try to negotiate with the CRA. The reality is that, the CRA does not negotiate. It wants the money that is owed to it.

No matter how good of a negotiator you are, the CRA will not lower the overall amount of tax debt that you owe. You owe this money and the CRA wants to receive it. In fact, CRA agents do not even have the authority to reduce tax debt under the Income Tax Act. If you cannot pay what you owe and do not cooperate, rather than negotiate, the CRA will instead use its considerable powers to collect the debt. This could include freezing your bank accounts, garnishing your wages, or seizing your assets.

Obviously, you do not want it to get to that point.

Depending on your financial situation, the CRA may give you the option of paying your tax debt via a payment plan. This probably seems like a good idea at first, after all, who doesn’t want to pay their debts over time in several smaller payments rather than a lump sum? However, the reality is that, before the CRA will consider a payment plan, they will want full details of your financial life.

This might seem like a reasonable request at first, however, remember that the CRA wants its money. In fact, it wants the money owed to it first. For this reason, the payment plan that the CRA proposes may not in fact be what is best for your financial situation.

For example, assume that you owe $2700 on your credit card and spend $100 a month on credit card debt repayment. The minimum payment that the credit card company requires might only be $20. You are paying more each month in hopes of paying down your debt faster and reducing interest payments. However, the CRA might look at these numbers and conclude that you are paying $80 a month to the credit card company that you could instead be paying towards your outstanding tax debt. This means that the payment plan the CRA proposes could put you in a bad financial situation.

As you can see, if you’re not careful, you can get into trouble trying to negotiate with the CRA. If you are in a position where you cannot pay your tax debt in full, it’s best to work with a professional when working out a payment plan.

A rising currency and a red-hot labor market has sent Canadian consumer confidence to the highest in three years. The Bloomberg Nanos Canadian Confidence Index a gauge based on telephone polling climbed to 60.5 in the week ended Aug. 4, the highest since July 2014 and close to a record. The improving sentiment suggests Canadians are shrugging off the impact of higher borrowing costs after the Bank of Canada raised interest rates last month, focusing instead on an accelerating economy that has driven the jobless rate to the lowest since 2008 and the purchasing power benefits that come with a higher dollar. Read more here

As consumer confidence rises so too does the appetite of consumers to borrow. Unfortunately the confidence level of your customers cannot be magically monetized and included in your corporate balance sheet. This is another reason we are encouraging our clients to maintain vigilance in the management of their accounts receivable.

Trudeau Officials are fearing the impact of speedy rate hikes by the Bank of Canada. Officials within Prime Minister Justin Trudeau’s government are concerned the Bank of Canada is moving too quickly to raise interest rates, fearing higher borrowing costs could inadvertently trigger a downturn. Governor Stephen Poloz raised the central bank’s key overnight rate on July 12, 2017 for the first time since 2010, and another increase is expected by the end of the year. Officials are speaking anonymously because they’re not authorized to comment and are concerned a series of rate hikes would lead consumers to claw back spending, stunting a recovery from a two-year oil shock.

While Trudeau and Finance Minister Bill Morneau have steadfastly declined to comment on monetary policy, as is customary, some officials privately think Poloz hiked too soon. The concern comes amid global warnings that an era of rock-bottom interest rates has left consumers and countries alike over-leveraged and more vulnerable than ever to hikes.

There’s no sign the government will intervene publicly in any way. The discontent however, also seems to signal that Trudeau and Morneau also don’t plan to rein in a spending program, focused on infrastructure and payments to families, that’s projected to result in deficits totaling C$102 billion over the Liberal government’s first four fiscal years. Read more here: https://bloom.bg/2uUftZn

Irrespective of how economic events unfold we strongly encourage our clients to maintain resiliency on their aging accounts receivable in Alberta and not allow the tepid improvement in the provincial economy in the first half of 2017 in any way be misread as a signal that “happy days are here again.”

Not only has Canada become a debtor nation, but most Canadians are drowning in debt. Our day–to–day dependence on debt begs the question: What does the Bible say about debt?

First, the Bible warns that “the borrower is servant to the lender” (Proverbs 22:7). As such, we are warned against the folly of being excessively indebted to those who may be unforgiving in their demands for repayment. We ought to take seriously the wisdom of the proverb “Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you” (Proverbs 22:26–27).

Furthermore, Scripture condemns the failure to repay our debts as wickedness. In the words of the psalmist, “the wicked borrow and do not repay, but the righteous give generously” (Psalm 37:21). Likewise, the apostle Paul urges believers to diligently repay their debts (Romans 13:8).

Finally, whether in the theocracy of ancient Israel or the democracy of modern day Canada, God’s people are called to be good stewards of the resources with which he has entrusted them. If we lend we should do so with kindness, and if we borrow we should do so with prudence.

Whether secular or spiritual it is difficult to argue against the wisdom above from the Holy Scripture.

Canadians will be interested (though probably not happy) to know that this year marks the 100th anniversary of the federal income tax. Conservative Finance Minister Sir Thomas White introduced it for debate July 25, 1917, three years into the First World War, just days after Parliament adopted compulsory military service. What conscription did for young men the income tax was to do for wealth.

Conventional wisdom says the tax was to be temporary. In fact, Sir Thomas said only that he hoped Parliament would consider it again after the war ended. Parliament did consider it. And we’re still paying.

The tax started as a levy on the very richest Canadians. In the early years, as few as one in 50 people paid. As late as 1938, only 2.3 per cent did. Now three-quarters of Canadians file returns, if only to take advantage of such benefits as the refundable GST credit.

TOO HIGH?

Our top rate used to be middle-of-the-road in the G7. After last year’s federal budget, Ontario’s top rate of 53.5 per cent is below only Japan’s and France’s. Of the top 10 marginal tax rates in North America, seven are in Canadian provinces. B.C.’s lowest-in-Canada top rate of 47.7 per cent is higher than in 42 U.S. states. And top rates for U.S. states start at over $500,000, in some cases almost $1.5 million. In most provinces, by contrast, the top combined federal-provincial rate starts at $200,000.

TOO IMPORTANT?

Ottawa and the provinces together get more than a third of their revenues from income tax. The average OECD country gets less than a quarter. Only four of 35 OECD countries (the U.S., Australia, New Zealand and Denmark) rely on income taxes more than we do.

TOO COMPLEX?

The 1917 income tax act comprised just 3,999 words and was only 10 pages long if you put it on a standard Microsoft Word page with 11-point font. The latest version contains more than a million words and takes up 1,406 such Word pages.

TOO COSTLY?

Just filling it out your taxes, or paying someone else to fill them out for you, now averages more than $500 a family in time and outlay. And that cost is regressive — a higher share of income for poorer than richer people.

Then there’s the economic cost from distortions in effort, investment, saving and education because of high marginal rates. Bev Dahlby of the University of Calgary estimates that in all provinces except Alberta a dollar of new income tax revenue creates more than a dollar of economic cost, so that the total cost exceeds $2 per every new dollar raised. In Ontario, the cost is almost $7 for every new dollar of revenue raised.

The Canadian bankruptcy regime was designed with two key purposes in mind – provide options to ‘honest but unfortunate’ debtors struggling with an unmanageable financial load and create an orderly means for creditors to recover amounts owed them. With the potential for abuse ever present, the Office of the Superintendent of Bankruptcy (OSB) has ways and means to detect and deal with offenders.

What constitutes a bankruptcy offence?

The common theme pervading bankruptcy offences under the Bankruptcy and Insolvency Act (BIA) is the intent by the debtor to deceive creditors and escape repayment with impunity. Offences can involve:

Documentation – falsifying a statement of account or hiding or destroying related documentation

Property – hiding or removing property or disposing of it at unfair, below-market values before or after bankruptcy

Credit – obtaining credit or good using false representations or without duly disclosing the bankruptcy to the creditor

Although the OSB has detection programs in place, bankruptcy offences are often discovered through complaints made by creditors. The Licensed Insolvency Trustee (LIT) may also uncover reasons for suspicion during the course of the bankruptcy process. The OSB may also learn of underhanded dealings through help by the members of the public.

Whichever means by which an offence comes to light, it must undergo examination by one of three special investigation units and always in association with the Royal Canadian Mounted Police (RCMP).

Serious Penalties – Case By Case

Offences under the BIA are punishable in a number of possible ways. Past cases have often involved imprisonment or other restrictions on personal liberty, such as probation, house arrest or curfew orders. Penalties may also include orders to perform community service or prohibitions from applying for credit. In most cases, the fraudulent bankrupt is ordered to pay amounts in restitution to the trustee.

The RCMP regularly reports bankruptcy fraud convictions on its website and its annals should serve as a warning to those who are tempted to use bankruptcy as an all-expense-paid free ride out of debt.

This post is written to help those looking in from the outside (bankers, lawyers, accountants, insurance agents etc.) spot when a client of yours may be experiencing financial difficulty and might need the help of insolvency professionals like us. ?Assessing whether your client is experiencing financial distress does not require access to detailed financial information, but rather facts which are readily available if you keep a keen eye and watch for them.

(Good) people are leaving. Management always thinks employees don’t know when the company is in trouble. They are wrong, the employees, particularly the good ones, always know and the good ones can always leave and find other jobs. So if there are people that you find are suddenly leaving an organization you are working with, it should raise a red flag or two.

Sales are declining. You won’t know the numbers but it’s usually obvious – fewer customers in the store, fewer delivery trucks, empty parking lots, less advertising (or more advertising of sales).

A competitor has opened and is making a splash. Sometimes the market isn’t big enough for two and the introduction of a competitor can often result in the older business not being able to compete. This is particularly true if the competito?r is one of the larger chains (i.e. Your client is a pharmacy and then Walmart opens a pharmacy in their store down the street).

Dusty inventory – it’s kind of an old joke that says the best way to do an inventory count is wearing white gloves – if you find dust on the inventory then it isn’t turning over fast enough. It also means the company is not very good at returning inventory that doesn’t sell to suppliers.

The owner(s) can’t explain the business. If you can’t tell me what business you are in and explain your value proposition in 30 words or less ( 15 is better), chances are you aren’t going to succeed.

The owner(s) can’t explain their role, their strengths and /or their weaknesses. Yes, you might be the president but you are likely either a sales person or a production professional, etc. So explain how you will have someone else to do things you can’t or won’t do.

The owner(s) don’t know the Key Performance Indicators (KPIs) for their business. Every business has KPIs that tell you how your business is doing on daily basis. One will be sales – might be dollars, but occupancy for a hotel, nightly covers in a restaurant etc. might be better indicators. There will be two or three others depending on the business and a good owner knows them, tracks them and works to improve them. If they can’t tell you what they are then they won’t know if they are doing well or not. A good owner can tell you what their monthly income will be before the accountant pulls off the financial statements.

And finally, a big red flag is raised when a business is growing too fast. It’s very, very difficult to grow a business extremely rapidly. More businesses fail by failing to expand correctly than by failing to shrink. Where will the business get the people, the equipment, the inventory, the financing etc. to grow. It takes a skilled entrepreneur or manager to handle all the pieces and failure is all too common. If any of the pieces are missing, failure is almost inevitable.

We always prefer to get called earlier – maybe we can help save the business by bringing in other MNP specialists. We often get called to?o late and are brought in wearing our insolvency/ restructuring hats.

Ian Schofield is a Licensed Insolvency Trustee based in our Regina location. To learn more about how MNP Debt can help, contact our local office at 306.790.7900.

More than half of Canadians are living within $200 per month of not being able to pay all their bills or meet their debt obligations, according to a recent Ipsos survey conducted on behalf of accounting firm MNP.

For 10 per cent of Canadians, the margin of error when it comes to household finances is even thinner, at $100 or less.

But those with anything at all left at the end of the month were in better shape than many: A whopping 31 per cent of respondents said they already don’t make enough to meet all their financial obligations

Debt is causing Canadians a fair bit of stress, the polling suggests, but few appear to be on track to buff up their monthly financial cushion.

Two-thirds of survey takers said they are “less than very confident” about their ability to create an emergency fund.

Another hair-raising finding from the survey: Roughly 60 per cent said they don’t have a firm grasp of how interest rates affect debt repayments. Such data raises the question of whether Canadians understand the implications of an interest rate hike by the Bank of Canada (BoC).

As an example a one percentage point rise in the BoC’s key interest rate would likely push up variable mortgage rates by a similar amount. A variable mortgage rate that’s currently set at 3 per cent, for example, would go up to 4 per cent, which represents a 33 per cent increase in interest payments for the mortgage holder. That’s an extra $83 a month for every $100,000 in outstanding mortgage debt.

A decision by the BoC to start lifting its key policy rate from historic lows would raise the cost of carrying debt across the country. The Bank uses interest rates, among other tools, to influence inflation and economic activity. Many economists believe it could start to raise rates in the first half of 2018, as economic growth picks up pace.

Although typically the BOC raises rates gradually and over time, the impact on Canadian wallets will be substantial.

According to The Google, today we honor the rich, vast Earth that’s sustained generations before us and continues to nurture life and inspire wonder. At an estimated 4.543 billion years of age, the Earth is still the only known object in the Universe known to harbor life. It’s also the densest planet in the Solar System and the largest of the four terrestrial planets. That’s quite an awe-inspiring roster of qualities, if you ask us.

Furthermore today’s Earth Day has also rallied an additional movement The March for Science whose website indicates that the March for Science is the first step of a global movement to defend the vital role science plays in our health, safety, economies, and governments.

Who can argue with any of the above? Here at CASE, we can’t argue with many of us being avid enjoyers of the simpler pleasures that only nature can provide; hiking, canoeing, cycling, organic gardening, fishing, hunting…the list goes on and on. Not only are such activities righteous, but also prove to be economically low impact on one’s pocket book, and good for ones long term physical, mental and spiritual health…important attributes for us in order to peak perform for our clients.

Today’s Earth Day, now bringing to our attention, the noble focus of science as it relates to all things Earth allowed us to recall some wonderful scientific numbers that were originally brought to our attention by Mark Bonokoski (Sun Media) back in the summer of 2016 to wit:

Canada has 990-million acres of forests, 370-million acres of wetlands and 167-million acres of crop yielding farmland. These are known as “carbon sinks”. Biologists tell us that trees absorb about 2.6 tons of carbon per acre. So if you do the math 990-million acres x 2.6 tonnes per acre = 2.574 billion tons of carbon being absorbed every year. Now if you do more math: 36-trillion tones {the amount of world emission}x 0.0167 (1.67%) = 601.2-million tones. — This is the amount of carbon that Canada contributes to the world emissions.– In the forests alone, Canada absorbs almost four times the amount of carbon that it emits. This means that the other three quarters of our forests are being sustained by carbon being emitted by the rest of the world. This calculation does not take into account the wetland or farmland that also absorb carbon.

We’re excited to see the new focus brought to us by March of Science. Many these days seem hell bent and focused on the idea that its money that solves all problems, including the challenges faced by our natural environment by way of carbon taxes (or carbon levies if that sounds less expensive to the economy). Perhaps bringing science and mathematics (fully appreciating we get it, math is hard) more will come to recognize that money isn’t the cure to what ails us.

Perhaps the next step in the evolution to the ‘earth debate’ will soon include A March for Common Sense; frugalness, simplicity, contentment and avoidance of conspicuous consumption. And the beauty of it all is not only will common sense not cost us money, it’ll save us money! Shouldn’t conservation entail conservation of everything, including our wallets? Unless of course if there is ulterior motives to those promoting money (taxation, levies et al.) as the solution to earths challenges.

Furthermore as any theologian, irrespective of denomination, that is worth his (or her) weight will tell you;

Today’s sheep are spared, so that tomorrow’s may be more lavishly fleeced.

Finance Minister Joe Ceci’s budget released this past Thursday showed a $10.3 billion deficit for the coming year and that Alberta’s debt would rise to $71.1 billion by 2020! Remember it was only 12 years ago, in 2005 in fact, that Alberta was debt free!

The province’s deficit for the coming year is $200 million higher than the government had forecast at last year’s budget announcement. Similarly, the fiscal plan shows next year’s budget deficit will be $9.7 billion, compared with the previous estimate of $8.4 billion.

Premier Rachel Notley said she knows Albertans are worried about the growing size of the debt, but said it is “absolutely manageable.”

Ceci’s ministry budget also shows the province’s debt-to-GDP ratio roughly doubling from current levels of 10.6 per cent to 19.5 per cent in 2020.

On Friday at an Edmonton Chamber of Commerce luncheon Ceci was quoted as saying, “With regard to financials, I can tell you we have the best balance sheet of any province, we have amongst the lowest debt to GDP and as we go forward we will address our debt servicing and the debt we will accumulate.”

So in essence at street level, what I’m hearing from our leaders is;

Little Suzy wants a pony and riding lessons? She’s entitled to it, she deserves it, take on debt to make it happen, its absolutely manageable, the math shows it, your income is guaranteed to be going up over the next 4 years.

That fishing cabin you’ve always dreamed of on the Snake River outside of Jackson Hole Wyoming? You’ve worked hard, you’re entitled to it, you deserve it, borrow to make it happen, its absolutely manageable, the math shows it, your income is guaranteed to be going up over the next 4 years…and while you’re at it you may as well get that $2000.00 handmade custom bamboo fly rod you’ve always dreamed of… it’s only a few more bucks in the grand scheme of things.

All this is ok Chris because even with all the debt you’re taking on with the pony, Suzy’s riding lessons, a cabin and custom made bamboo fly rod your personal debt service ratio (PDSR) will still be lower than everyone else’s in the neighborhood. You can just address the debt servicing as it accumulates over time.

Are you kidding me?

Unsophisticated, credulous, naive and gullible.

But then again from where we sit what do we know about the long term negative consequences that debt has on people?

Case Receivable Management Inc. is dedicated to reducing the financial losses of our clients through the expeditious recovery of their aged receivables and bad debts. By way of negotiations, diplomacy, skill, and respect for the individual it is our mission to mitigate the potential financial losses of our clients while leaving their customers feeling that they have been treated professionally and with dignity.